Survey shows drop in spending power
Jun 18 2012
Spending power continued to decline last month, a survey has showed, although there were signs that the squeeze on household incomes was starting to ease.
Discretionary spending power fell by 0.3% in May, the Lloyds TSB spending power report said, which on average equates to almost £34 a month less than a year ago to spend on non-essential items.
However, growth in essential spending eased, suggesting consumers could be starting to feel the effects of falling inflation. The consumer price index (CPI) fell to 3% in April, from 3.5%, in March, and is expected to fall further in figures released this week.
The decline in spending power, after inflation, illustrates that conditions for consumers remain tough largely due to weak income growth, Lloyds TSB said.
Patrick Foley, chief economist at Lloyds TSB, said: "Weak income growth and stubbornly high inflation is ensuring that the squeeze on consumers is remaining in place longer than many thought it would.
"Growth in spending on essentials is now showing signs of moderating, which is positive. But the weakness in income growth is severely limiting the benefits for consumers."
Some 79% of people believe the current level of inflation to be "not good" or "not at all good", compared with 85% in April and 83% in May last year, Lloyds said. But greater affordability of essential items was a key factor in limiting the squeeze on consumers in May, Lloyds added, with annual growth slowing across nearly all measures.
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